The market capitalization of Ethena’s synthetic dollar, USDe, has been slashed by 50% in the last month, falling from $14.8 billion to $7.2 billion. The $7.6 billion capital flight follows a sharp decline in the yield offered to holders.
The core trigger for the collapse was the annual yield offered to USDe stakers falling to just 5.1%. That figure dropped below the 5.4% borrowing rate for USDC on lending protocol Aave, making popular leveraged yield-farming strategies unprofitable and forcing a mass unwind of positions.
“The decline in the coin’s market cap occurred amid a drop in yield to 5.1% annually, compared to double-digit figures at the start of the year,” ForkLog reported.
This capital reduction comes during a turbulent month for the crypto market, which has seen billions in outflows from spot Bitcoin ETFs. Despite the market cap collapse, on-chain transaction volume for USDe remained high at $50 billion over the past month, suggesting continued use in trading.
Ethena’s governance token, ENA, was volatile on the news. Read: $0.29 at press time.
